Letter from John Schnatter


Papa John's International

NOV. 26, 2012

Papa John's and ObamaCare

Pizza Chain Will Increase Jobs, Add Stores and Continue to Offer Healthcare to Employees

By John H. Schnatter (Papa John)

As a pizza maker, I can teach you how to spin dough. But I got a schooling of my own on a very different kind of spin following comments I made about the Affordable Care Act and its possible effects on small business owners like the hundreds across the country who own Papa John's restaurants.

Despite what you may have read or heard, here are the facts:

  • Papa John's International has no plans to close stores, fire people or cut hours because of ObamaCare;
  • In fact, we plan to open hundreds of stores in 2012-2013 and create more than 5,000 new jobs;
  • Since I founded Papa John's in 1984, health insurance has been offered to every corporate employee and worker in company-owned stores;
  • Papa John's will comply with the Affordable Care Act as it does with every other state and federal law on the books.

In other words, Papa John's will continue to grow and offer competitive benefits to our employees just as we have for the past 28 years. And like countless other businesses, we are assessing how ObamaCare will affect our operations and cost structure.

Yet that rather mundane reality got lost in media coverage surrounding remarks I made to a Florida college class. Suddenly, and the day after the election, Papa John’s was caricaturized as a reactionary corporate behemoth scheming to slash worker hours, jack up pizza prices and abandon stores to avoid the burden of offering health insurance.

Running a business requires making a lot of very difficult decisions on a daily basis. It's a truth we all need to keep in mind as the nation begins to implement ObamaCare because there will be trade-offs, which I also discussed with the class, but got overlooked in the media storm. I told the students:

  • "So, find your gift and don't get discouraged. So don't ever give up on yourself and know and trust me, it's in there. Somewhere it's in there. And then once you find it, then go to the races, just go with it. Have a passion for it, work it to the bone and you'll be successful."
  • "It's all about friends, it's all about people." "I'm in the people business."
  • "We've given raises the last nine out often years to our employees. That's a big deal to me."
  • "We're trying to raise $1 million for the Red Cross (for hurricane Sandy) on Friday. That's what it is all about"
  • "The good news is 100% of the population (full time workers) is going to get health insurance. I'm cool with that."
  • "We're all going to pay for it. There's nothing for free."
  • "We're going to have to eat some of the cost but I think some of it gets passed on. We don't operate in a vacuum, so our competitors are going to have to do the same thing."
  • "And this way I get to provide health insurance and I'm not at a competitive disadvantage ... our competitors are going to have to do the same thing."

As the transcripts show, the truth of how we will balance the objectives of the law with the realities of the pizza business is a lot more nuanced and compassionate than the slash-and-bum headlines would have you believe. I was trying to inspire our youth, certainly not further divide our country.

Clearly, something got lost in translation.

The remarks that sparked the headlines were made during an entrepreneurship class, where I was asked to discuss real-life small business situations with the students. Also in the room was a reporter for the local newspaper.

Over the course of a wide-ranging session, the discussion turned to how small business owners will adjust to the mandates of the Affordable Care Act. Here is the part of the interchange (from a transcript of my remarks) that made "news":

Reporter: "Do you think your–you know–franchise owners ... are going to cut people hours back to make them part time instead of full time? "

Me: "Well, in Hawaii there is a form of the same kind of health insurance and that's what you do, you find loopholes to get around it. That's what they're going to do."

Reporter: "My understanding is that if you're a full time employee, which is 35 hours or over you'd be covered. Or if you're part time then you wouldn't be. So wouldn 't some business owners just cut people down like 34 hours a week so they wouldn't have to pay for health insurance? "

Me: "It's common sense. It's what I call lose-lose."

The question was what I believed Papa John's franchisees and small business owners might do in response to ObamaCare, not what the company would do - and, in fact, already does, which is offer a competitive and comprehensive health insurance package to its workers.

Although it may seem like splitting hairs, the point here is an important one: Companies like Papa John's International are largely a collection of small, independent businesses. The average Papa John's franchisee owns three or four stores. The franchisees own their restaurants so they decide who to hire, how many hours to give each employee and what they pay each employee. Like any small business in these economic times, our franchisees make countless decisions and trade-offs every day so they can keep people employed while providing a quality pizza at a competitive price. If a small business owner is faced with reducing worker hours or going out of business, the choice is tough but clear.

John H Schnatter is the founder, chairman and chief executive officer of Papa John's, which started in a broom closet in his Dad's bar and now operates and franchises more than 4,000 pizza restaurants and employs 77,000 team members worldwide.